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Business advisory firm FTI Consulting (NYSE:FCN) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 3.3% year on year to $898.3 million. Its non-GAAP profit of $2.29 per share was 27.7% above analysts’ consensus estimates.
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FTI Consulting (FCN) Q1 CY2025 Highlights:
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Revenue: $898.3 million vs analyst estimates of $906.8 million (3.3% year-on-year decline, 0.9% miss)
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Adjusted EPS: $2.29 vs analyst estimates of $1.79 (27.7% beat)
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Adjusted EBITDA: $115.2 million vs analyst estimates of $96.19 million (12.8% margin, 19.7% beat)
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Operating Margin: 8.8%, down from 10.7% in the same quarter last year
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Free Cash Flow was -$483 million compared to -$279.5 million in the same quarter last year
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Market Capitalization: $5.55 billion
StockStory’s Take
FTI Consulting’s first quarter performance reflected mixed dynamics across its business segments, with leadership attributing results to continued strength in forensic and litigation consulting, but acknowledging notable headwinds in economic consulting and technology. CEO Steven Gunby pointed to confidential but “critical” assignments in the Forensic and Litigation Consulting group, while also highlighting operational adjustments and targeted headcount reductions to address lower demand in other areas.
Looking ahead, management expressed caution about the persistence of regulatory and macroeconomic uncertainty, which they expect to impact client activity and demand for advisory services. Gunby described the current environment as “filled with uncertainty” and noted, “if the thrust of this administration is to cut back regulatory enforcement on a number of key areas, that can have a pretty big effect on us.” FTI plans to revisit guidance after assessing second quarter results, reflecting the range of possible outcomes facing the business this year.
Key Insights from Management’s Remarks
FTI Consulting’s leadership offered a detailed breakdown of segment performance, emphasizing the interplay between shifting client needs, regulatory environments, and internal operational changes. The quarter’s deviations from Wall Street expectations were largely due to lower demand in macro-sensitive areas and the timing of major client assignments, while cost controls and one-time items supported profitability.
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Forensic and Litigation Consulting momentum: The group delivered a record quarter, benefiting from large confidential assignments and higher demand for risk, investigation, and data analytics services, particularly in cyber and regulatory compliance. Gunby noted increased visibility of FTI’s expertise in these areas as a key driver.
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Economic Consulting headwinds: Departures from Compass Lexicon and reduced M&A activity led to revenue and profit pressure. Management explained that new hires—often requiring upfront investment—will take time to contribute meaningfully, resulting in a near-term hit to the bottom line, though long-term prospects remain positive.
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Technology segment volatility: The technology business experienced lower M&A-related demand, partly offset by growth in investigations. Management cautioned that recent increases in M&A-related work are unlikely to continue, citing a broader market slowdown and reduced federal premerger activity.
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Restructuring and transaction services: Corporate Finance and Restructuring saw lower revenue from transformation and strategy services, but pockets of strength in transaction services and international markets like Germany. Leadership highlighted the unpredictable impact of macroeconomic and policy shifts, including tariffs, on these services.
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Cost management and investment: The company undertook targeted headcount actions across segments, generating salary and benefit savings. However, these savings are largely being offset by ongoing investments in talent and forgivable loans, especially for new academic recruits in Economic Consulting.